2024 could be the big year for hemp on carbon markets – if we are cautious enough in measuring and reporting its positive impact 

Carbon credits are a great opportunity for the hemp sector, but finding a reliable Standard is crucial to avoid reputational and financial backlash as carbon markets move from carrot to stick in the wake of two crippling scandals on the voluntary market.

Both regulatory and public opinion-lead environmental pressure is increasing on companies across the board. This is a welcomed advancement. Economic actors are expected to not only be transparent on their greenhouse gas emissions and make substantial efforts to reduce them, but increasingly to “offset” their residual footprint by purchasing carbon credits. In the wake of the 2015 Paris Agreement and despite meagre progress during the last COP, the voluntary carbon market (VCM) is playing an increasing role in corporate climate contribution as the role of credits has been not only encouraged by the IPCC[1], but also recognized as necessary to reduce the current overabundance of atmospheric CO2[2].

This will lead to increased demand as more companies will be looking for reliable carbon credits. We currently emit about 50Gt of CO2 globally every year. Meanwhile, current carbon sinks (the carbon we pull out of the atmosphere every year) only represent 2 Gt. Driven by the increased pressure on companies, the demand for carbon removals (VCRs) is universally expected to increase. And so is their valuation following a basic limited-supply-and-increasing-demand dynamic. As global demand for voluntary carbon credits could indeed increase 15-fold by 2030, and 100-fold by 2050[3], prices are expected to go up.

In other words, the development of carbon-negative projects has to ramp up at an unprecedented rate, while existing carbon sinks all have their shortcomings:

Bioenergy with carbon capture and storage (BECCS) is the process of extracting energy from biomass and capturing and storing the carbon. While welcome, it is limited in scope if we do not want it to compete with arable land used for food production – which could cause famines or further deforestation, cancelling its positive climate impact.

Direct air carbon capture and sequestration (DACCS), meanwhile, remains exceedingly expensive. Furthermore, it is mostly used to cancel the emissions of heavily fossil fuel-reliant activity rather than pulling some of the overabundant carbon already present in the atmosphere. In other words, it hardly ever contributes to reducing the overabundance of CO2 currently present in our atmosphere.

Forestry credits are going through a crisis of their own with recent reports claiming that 90% or more of all existing REDD+ credits (issued in proportion to the amount of deforestation avoided) have had no positive impact on the climate whatsoever[4]. This has caused a major drop in trust, demand, and valuation as they seem on their way to becoming a subprime asset on the carbon markets.

Following the South Pole and Verra scandals, even Afforestation, Reforestation and Revegetation (ARR), which for the most part generate reliable credits, are also suffering from confidence loss in tree-based solutions showing how a big mishap can give the whole field a bad name. 

As a consequence, market sentiment is pretty low. Times are hard for forestry credits and for carbon credits in general. But a crisis for one may be an opportunity for others. As the first hemp-based credits have entered the VCM, REDD+ credits (which account for about 25% of all VCRs out there) seem to be on their way out for many buyers. This will reduce even more the number of available carbon sinks at the very moment demand is scaling up, creating even more interest in newcomers. Especially amongst alternative nature-based solutions, which are affordable while allowing for a number of environmental co-benefits (biodiversity preservation/restoration, low water use, soil regeneration, limited use of non-renewable resources…).

 

Incidentally, hemp is one of the strongest contenders for becoming a leader in nature-based carbon capture. By transforming hemp biomass into durable goods (hempcrete, fibre mats, biochar), we can store the carbon absorbed through its photosynthesis for decades if not centuries. In the jargon, this is called permanence. If not transformed, the plant biomass is burnt or decays, and all the CO2 it pulls out is reemitted in the atmosphere.

The process of absorbing atmospheric CO2 is called biogenic capture and is powered by sunlight. Not only is it a net positive in itself, but carbon-negative alternatives can in turn be substituted for otherwise carbon-intensive products (concrete, asphalt plastics and other oil-based composites, fertilisers, fuels…). This is a huge opportunity for hemp producers.

Additionally, soil carbon capture is greatly enhanced by hemp due to the plant’s deep taproot and dense rhizhomal root networks that strengthen local ecosystems. While no robust protocol has been validated by the actors policing the VCM yet, research is being conducted and the possibility of seeing a hemp-specific ICVCM and ICROA-backed soil carbon methodology is high for 2024. This would allow hemp growers, whether or not their biomass is transformed for long-lasting products, to claim carbon credits as long as regenerative farming practices are in place – which is made easy by hemp’s extraordinary resilience and limited needs. 

 

However, actors in the sector must be careful about choosing a Standard with good credentials and a robust enough, reliable protocol, if they want to reap the benefits from the hemp’s natural capacity to sequester vast quantities of carbon. Easy money attracts the wrong people and the race to be first mover at all costs pushes players to make mistakes. Mistakes that are paid at a strong cost by the entire ecosystem as the recent REDD+ debacle shows (two dominant VCM actors had to change management and one was left on the verge of bankruptcy).

This has also caused much (mostly legitimate[5]) resentment amongst other players on the VCM, who had to suffer sectorial reputational damage despite doing everything right.

It would be immensely damaging for the hemp sector to become the next big failure on carbon markets. Some players are unfortunately entering it without transparency on their protocols and projects while demonstrating little if any understanding of carbon capture. Some pretty dubious methodologies are starting to appear, or even worse, some credits are sold with no published methodology attached (which should be a deal-breaker for any hemp producer trying to monetise the positive environmental impacts of his activity).

Others have even copied ARR protocols with unnecessarily fanciful tech measuring equipment, but seem to ignore the fact that unlike trees, due to its short lifespan, hemp needs to be transformed into a durable end-product for the carbon to be durably locked (permanence). Only then can you legitimately claim carbon credits. 

Thankfully, several indicators can help growers sort the wheat from the chaff, and choose a reliable partner. The name of the game is transparency. The first thing to verify is whether the proposed methodology to create carbon credits is published online and freely accessible to all. Any serious Standard is open about its calculations, hypotheses and will not avoid answering questions about its protocol to measure carbon captured by a project. Not doing so is an immediate tip-off that you may be dealing with a fraudulent player.

Another determining point is whether the methodology is specific to the final product that hemp is transformed into. Without a fully detailed production chain, it is impossible to compare captured carbon to production emissions (a process also called a life Cycle Assessment or LCA) and obtain the net carbon capture from which credits are generated. Going further, this will inform on capture permanence through the product’s lifespan. Consequently, when a methodology doesn’t state what it aims to produce or give administrative documents backing those claims, it is not valid and the credits it generates will sooner or later be null and void.

Additionally, several certifiers have emerged on the VCM. While their rubber stamp is only a minimal assertion of a project’s actual quality as shown by the aforementioned recent scandals, not being greenlit by them usually is a tell that a project might be dodgy. It is worth keeping in mind that some players have claimed compliance without actually getting the blessing of said certifiers. This is why transparency on how a Standard meets the criteria attached to certification is also a good way to see if they practise what they claim.

The main references out there are ICVCM for basic projects and ICROA and  QU.A.L.ITY for more advanced projects, but there are plenty of sector-specific accreditations as well.

Another tell is if major carbon trading platforms have validated projects and taken on their credits. It may at times be frustrating to have to jump through the hoops set by players that may have been profiteering on other people’s environmental work, but they have been around long enough to create decent screening. That being said, all the Verra REDD+ projects exposed last year were routinely traded on such platforms, so their endorsement might not be enough to guarantee the infallibility of a Standard. Not featuring on any of these platforms, however, is a pretty bad sign.

These words of warning should not eclipse the good news here: if carbon credits are leveraged in the right way, they can be a major contribution to breaking hemp into the mainstream as a key tool to combat climate change and durably change its public perception. As an industry and more widely as a sector, we’re in this together. There is an immense opportunity out there, but the lure of easy money could get in the way and durably spoil it for everyone (and the planet). This is our common responsibility. 

About the author

Christophe Nourissier is a carbon credits project manager. He has been an observer and actor on carbon markets for the last 4 years, is Head of carbon mitigation projects for Augur Associates, a consultancy specialised in cannabis and hemp.